Latin Nations Still Need Help

DURING Enrique Iglesias' two-year tenure as president of the Inter-American Development Bank (IDB), virtually every country from Mexico to Argentina has installed a new leader, many through democratic elections. Borne of popular dissatisfaction with government mismanagement, these political shifts are delicate, says Mr. Iglesias.

``Many of the changes go hand in hand, of course, with economic crisis,'' he says. ``We cannot stop expressing our concern that the degeneration of the economic scene can pose major problems for the preservation of democratic processes.''

In an interview at the bank's Washington headquarters, he stressed that the newly established democracies must be nurtured by sound economic policies and leadership - and outside financial help, including that of his bank.

That is the message Iglesias will present at the annual meeting of the IDB in Montreal today.

Iglesias, a former foreign minister of Uruguay, has been widely applauded for shaking up the bank and restoring its credibility after years of alleged mismanagement.

Like its counterparts devoted to Asia and Africa, the 30-year-old IDB is a regional multilateral lending agency. Backed by the United States, Canada, Japan, and other Asian and European nations, the bank supports development projects in Central and South America, and the Caribbean. As of January this year, the bank's authorized capital registered at $61 billion. That gives it significant power to play a stabilizing and development role.

The bank's greatest challenge, he says, is to stimulate official and commercial lending to the region which has been embroiled in a debt crisis for eight years. Latin America's poor repayment history has left many credit sources looking elsewhere for business.

``Balance-of-payment lending'' (money loaned merely to cover international payments deficits) from private banks ``is a thing of the past,'' says Iglesias, though these banks ``will continue to be active in trade finance and co-financing specific projects.''

Many lenders now regard Eastern Europe as a better return for their dollar. ``In the short run, [the focus on Eastern Europe] implies more competition for resources.'' But Iglesias believes the winding down of the Cold War will release some funds for the new democracies of Latin America.

Referring to Eastern Europe's recent departure from command economies, Iglesias is quick to point out that ``Latin America's 500 million people don't need to create a market economy. They've had one, and they know it works.'' The private sector is the highest priority for investment, says Iglesias. ``It is under great stress.''

The IDB's Microenterprise Division underscores Iglesias' interest in decentralizing power from overburdened governments. Capitalized at $89 million, it is seen as a formal acknowledgment that the region's private ``informal sector,'' which operates outside the purview of debilitating government regulations, is important and worth encouraging.

Iglesias says investments in infrastructure, essential for the expansion of industries, agriculture, and tourism, are priorities for bank financing. All three reap coveted foreign exchange.

As Central America emerges from a decade of conflict, Iglesias says the bank should be a major partner in its development. ``We are interested in Central America as a whole, with an eye toward integration,'' he says, stressing that a common marketplace used to exist. ``Twenty-five percent of these countries' imports and exports used to be intra-[Central American] trade.''

It has been five to six years since the IDB has been active in Nicaragua, says Iglesias. The bank stopped lending to Panama two years ago, ceased operations a year ago in Honduras.

These arrested relationships directly result from countries' inability or refusal to repay loans to the bank. He's confident the situation is temporary.